While most people think of worker's compensation as the insurance program that provides financial support when a worker suffers a physical injury on the job, mental and emotional stress is also a covered "injury." Today, compensation for workplace stress is once again a hotly disputed topic in Michigan. Newspapers and magazines are suddenly aswirl with articles about the issue. Legislators and lobbyists are ardently debating the topic in Lansing. Administrators and adjudicators are once again focusing inordinate attention on the subject. Why this sudden new interest?

One estimate has California mental claims growing by 750% between 1981 and 1991, becoming 17% of all claims by 1991.

The simplest answer is that last year the Michigan Supreme Court issued its first major pronouncement on the topic in more than 15 years, at last providing a definitive interpretation of specific statutory language passed way back in 1980 to deal with worker's compensation stress claims. In Gardner v. Van Buren Public Schools1, the Supreme Court finally clarified what the new language means. Needless to say, as with every major court pronouncement, some people are happy with the result, some people are in various states of despair, while many more are scratching their heads, trying to figure out what it all means.

However, the simple answer is a bit misleading. In fact, the issue has been causing consternation and intense debate for more than 35 years. In this period, the broad question of employment stress and our society's inability to effectively deal with it has become a major source of discussion throughout the country, stimulating dramatic new developments in the psychiatric sciences, tremendous upheavals in the law, and significant changes in workplace organization and behavior. State after state has experienced legal inquiry and dispute on the question of whether victims of stress should be compensated, while an expansive new industry of psychologists, psychiatrists, counselors and clinics has sprung up to provide advice, assistance, treatment and opinion.

As the number of stress claims has been growing, so has the overall cost of worker's compensation. Leading national worker's compensation scholar John Burton, Jr. reports that nationwide employer expenditures for worker's compensation benefits alone rose from $2 billion in 1960 to $5 billion in 1970 to $21 billion in 1980 to an estimated $56 billion in 1990 to an estimated $62 billion in 1992.2 These statistics may be conservative. In California alone, compensation costs rose from $3.7 billion in 1981 to a projected $11 billion in 1991. Of this total, a significant part of the growth is attributable to mental claims. One estimate has California mental claims growing by 750% between 1981 and 1991, becoming 17% of all claims by 1991. Subsequent articles indicate an even more sudden growth in mental claims since 1991. In short, worker's compensation is becoming a growing cost concern for business, and mental stress claims are a very significant factor in such growth.

In this intense and growing storm of controversy, Michigan has been a leading player. It was in Michigan that claimants first received the right to be compensated for the experiencing of everyday common stress at work. It was the Michigan Supreme Court which, in a path-breaking exploration of the question of when work should be considered to have been a cause of mental disability, issued a 1978 decision which to this day is considered by most commentators to be the most liberal stress decision in American legal history. Few legal commentators engage in surveys of the law on stress without paying due respect to the critical role Michigan has played in shaping both the debate and the law on liability for stress claims.

Why is this issue so important and what is it really all about? To answer this question, it might make sense to begin with some examples of what the employment stress claim might consist of. Let's imagine the following five individuals:

Sam is an electrician working with electrical high wires. He has always been comfortable climbing up and down and working on top of high towers. He has no history of mental complaints. One day, while working on a tower, he witnesses his close friend and colleague improperly touch a wire and plunge to his death. The event is so traumatizing, that Sam is unable to continue working as an electrician.

Mildred is a shy and mild-mannered secretary. She has never been comfortable around large groups of people, but has managed to perform her work in a legal office without difficulty. One day, she is reassigned to a new boss who insists on engaging in daily sexual banter with Mildred at her desk and who constantly makes provocative comments about the state of her dress. Mildred begins to unravel, making numerous mistakes in her typing and filing. She becomes so embarrassed by her deteriorating performance that she feels compelled to leave her employment.

Juanita is a social service worker providing services to abused women. She has been experiencing problems with her own marriage. Her husband verbally abuses her and has driven one of her children into a drug addiction problem. As a result, Juanita has been depressed for quite some time and has even sought therapy to help her cope with her problems. One day a client unhappy with Juanita's work threatens to "get her" if she does not do a better job. Juanita rushes to her therapist, who urges her to cease working.

Mary is a policy analyst with a government agency. She has never been a particularly stellar performer at work, but has managed to get along with her various supervisors, comfortable in the knowledge that her civil service protections will keep her employed. One day she is assigned to a new supervisor determined to enhance the overall performance of the department. This supervisor institutes new performance evaluation procedures designed to measure accuracy and productivity for all members of the department. Mary does poorly in these evaluations. The supervisor tells her that she must improve her performance or risk demotion. Mary is distraught with her poor performance evaluations and claims disability.

John is an assembly line worker with a long history of hospitalizations for organically-induced neuroses. He has had many jobs and been repeatedly fired for losing his temper at work. One day, while entering the factory, a co-worker walks up to him and says, "Good morning, John." John, thinking he is going to be attacked by the co-worker, suffers a nervous breakdown.

Are these five individuals entitled to worker's compensation benefits because of the stress they have experienced at work? The short answer is that, based upon a more careful evaluation of the facts in each case and the opinions of medical experts, all five of them might well be entitled to such benefits under current Michigan law. However, based on the way the law has been interpreted, these five examples present a progression from the most likely to receive benefits to the least likely. Why this should be so will be explored at greater length in the course of this report. What is more important at this point is to recognize how common these five factual scenarios are and how expansive the field of benefit entitlement might become.

What concerns the business, legal and government communities of this state is that employment stress has the potential to overwhelm the worker's compensation system, imposing vast new costs on employers who are made to be universal insurers of the public's mental health. Whether using the worker's compensation system to provide such insurance is a worthy public policy objective is not the subject of this report. Such a decision belongs in the hands of the Legislature and the Governor. What is critical is that all of the players in the current debate understand what is at stake and the consequences of their policy choices.

It is not the author's goal to advocate any particular policy option or legislative change. Instead, the goal of this report is to provide interested individuals with insight into the issue of stress claims. To that end, the report will attempt to avoid too much legal terminology and technical jargon. Its purpose is to contribute to a basic layman's understanding of the choices that exist and the questions that remain outstanding in this extremely complicated area of law.

In the following pages, we will begin by briefly discussing the basic purposes and workings of the worker's compensation system in Michigan. We will then explore the nature of stress, the limits of our understanding in this area, and the basic choices presented to the law for compensating such stress. We will take a look at how other states deal with the issue of compensability and then take a careful look at the history of stress claims in Michigan, focusing on key decisions and statutory changes. In what hopefully will not be too dry an analysis, we will try to understand where Michigan is after the 1994 Gardner decision and where it might be going.